The Institute welcomes the Government’s steps towards reform of Australia’s personal tax system. On the back of the last Budget’s positive tax announcements, the measures are generous and a reasonable short-term measure. However, another opportunity to introduce much needed major structural tax reform has been lost. 
 
“The benefits of lifting of the thresholds, whilst generous in the short term, are likely to be eroded away over time without indexation”, said Institute Tax Counsel, Mr Ali Noroozi. 
 
Mr Noroozi said, “The Institute was also pleased to see a concerted effort to minimise the tax implications on welfare recipients trying to return to the workforce.” 
 
“The Institute has long advocated managing effective marginal tax rate inequities, where the combined effect of the additional tax payable and the loss of welfare payments makes it unattractive for those on support to seek additional income,” Mr Noroozi said. 
 
“Increasing the incentive for welfare beneficiaries to return to work by tapering rates at which benefits are withdrawn is a common sense move”. 
 
The Institute also strongly welcomes the abolition of the Superannuation Surcharge. 
 
Whilst the Budget contains some much needed personal tax reform, the Institute will continue to lobby for an overhaul of the personal tax system. Issues remaining to be addressed (as raised in the Institute’s personal tax policy) include the following:

• Indexing of marginal tax rates to remove “bracket creep” 
  
• Alignment of corporate and personal tax rates; and 
  
• Optional tax returns for certain taxpayers.

• Removal of the 3% tariff applying to business inputs, where no substitutable goods are manufactured in Australia, from 11 May 2005; 
  
• A commitment to allow businesses tax relief for ‘blackhole’ expenses from 1 July 2005, following an earlier announcement which did not take as strong a stance; 
  
• Limiting the imposition of capital gains tax on non-residents to, in the main, Australian real property; 
  
• A four year income tax exemption for temporary residents for most foreign source income, including capital gains on foreign assets; 
  
• The abolishment of the foreign loss and foreign tax credit; and 
  
• Extension of the proposed tax-timing hedging rules, beyond gold producers and cotton traders to all tax payers in all industries with audited financial accounts;